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CO2 price floor likely in China’s ETS pilot - researchers

12 Oct 2012 10:04:10 | edcm

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China's seven pilot emissions trading systems (ETS) will represent the world's second biggest carbon market by 2014 and are set to "dovetail" neatly with parallel developments in Asia and at UN level, according to new analysis.

But researchers at Climate Bridge, a carbon offset company based in China and Australia, have also pointed to details of the Chinese scheme which could hamper linkage with the world's biggest carbon market, the EU ETS.

China's pilot schemes are likely to include price controls such as a floor price and a ceiling price. And China is still considering a form of carbon tax, in addition to emissions trading, the researchers said.

"The details of the pilots are beginning to emerge and will influence how the national scheme develops," the researchers said.

Australia was forced to scrap its carbon price floor in order to facilitate linking its nascent carbon market with the EU ETS (see EDCM 28 August 2012).

China's decision to move towards emissions trading has important implications for UN climate negotiations, because "China's scheme aligns with other global schemes, paving the way for a global climate change agreement coming into force by 2020," the researchers said. China's "positive experience" of the UN's clean development mechanism (CDM) is one of the main reasons the country is now developing its own domestic carbon trading scheme, the researchers noted.

China's heavy involvement in the CDM - around half of all registered projects are in China - has also helped the country to establish the "administrative capability" to manage a robust carbon markets, the researchers said.

"An industry of environmental consultant and auditors has emerged, to record and verify greenhouse gas emissions. The major international environmental auditing organisations have all established greenhouse gas verification offices in China," they said.

Taken together, China's pilot carbon trading schemes will be surpassed only by the EU ETS, even though the pilots represent only a fraction of China's total emissions.

"These pilots are expected to cover 700 million tonnes of carbon dioxide [equivalent] by 2014, compared with 382m tonnes in Australia, 165m tonnes in California and 2.1bn tonnes in Europe," the researchers said. VF

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